Sunday, November 28, 2021

OPINION AND ANALYSIS | 11-05-2019 09:47

Sometimes it’s best to just let go

The sands of time bring us closer to the day of reckoning, where we will finally know our fate and hopefully look forward with some very elemental level of certainty to the next phase.

The sands of time bring us closer to the day of reckoning, when we will finally know our fate and hopefully look forward with some very elemental level of certainty to the next phase. Yet, things continue to happen as we move closer, and even though former president Cristina Fernández de Kirchner played it mysteriously once again this week, she proved her power of attraction yet again, garnering the support of tens of thousands of followers while becoming the centre of attraction for TV channels and news websites across the country. Yet, this time “fear” of Cristina didn’t generate a financial panic. Instead, currency markets remained tranquil, with Argentina’s default risk timidly sliding as Wall Street, and the United States, has firmly decided to put its eggs in President Mauricio Macri’s basket. The next few days and weeks could prove decisive for the country, torn between Macristas and Cristinistas, with no clear path toward normalcy. Hoping the peso-dollar exchange rate doesn’t shoot past 50 is both Macri’s and Wall Street’s bet, while Cristina will remain as silent as possible, waiting for the economy to continue spiralling out of control.

According to JPMorgan Chase and Standard Chartered, the Argentine peso should remain rangebound, with a target of 50 pesos for every dollar from here to the election at least. Both financial institutions have told their clients that Argentina’s currency will “outperform” its forward curve, which essentially means it is time to engage in the famous “carry trade” or, as locals like to call it, la bicicleta. It makes sense. The International Monetary Fund has lent the government the biggest amount of funds it has ever put out to play, while it has continuously expressed their support for measures that traditionally go against their own ethos, including price controls and increased Central Bank intervention in the currency markets. Higher interest rates – which are already amongst the highest in the world – along with bond buybacks by official entities, along with a positive account balance and the influx of dollars due to the exporting of grains have helped put a lid on the dollarisation of portfolios. For the time being. As Standard Charter noted in a recent research note, they don’t know how long this will hold after the election.

All of this is a clear indication that the United States is putting its money where its mouth is. Donald Trump jumped on the phone with Macri for a mere 10 minutes this week, while the US Embassy announced a loan aimed at shoring up Argentina’s infrastructure through the national sovereign wealth fund, OPIC. Many are quick to point out the previous business relationship between Macri and Trump, but this obviously goes further and has more to do with geopolitics than golf.

As La Nación’s Carlos Pagni pointed out a few weeks ago, the slow motion train wreck that is Nicolás Maduro’s Venezuela plays into the hands of Macri and his hopes for re-election. National Assembly President Juan Guaidó’s international support is most strongly backed by Washington, which has been consistent in their behind-the-scenes attempts to oust Maduro. The Trump administration has also reversed the Obama-era approach to Cuba, putting further pressure on the island nation, which is the cornerstone of Maduro’s support. This has to do with Russia and Iran, two key allies of the Venezuelan autocrat looking to consolidate a power base in the American continent, historically Washington’s backyard.

In the context of the tug-of-war over Venezuela, Macri comes out as a winner in the face of the Argentine electorate. With the Kirchnerites closely linked to Maduro — remember how Hugo Chávez bankrolled Cristina’s presidential campaign? — and Venezuela quickly becoming South America’s Syria, Macri can seek to differentiate himself while pointing to the strongest point of his presidency, international support.

Of course, this is not enough. As his electoral position weakened considerably, to the point where polls began to show he could lose against Cristina, Macri and his electoral team, namely Cabinet Chief Marcos Peña and Ecuadorean advisor Jaime Durán Barba, sprung into action. After securing the IMF’s support and announcing price freezes to control inflation, they launched a 10-point plan to sign a truce with non-Kirchnerite Peronists. While it may seem like too little too late, the PRO Party, which controls the ruling Cambiemos (Let’s Change) coalition, is beginning to take charge of the agenda. They reached out to the likes of Roberto Lavagna and Sergio Massa, both of whom rejected Macri. The Casa Rosada, with Interior Minister Rogelio Frigerio leading the charge, even invited Cristina to discuss the plan.

Whatever the merits of Macri’s 10 points, the two big issues coming up have to do with his (only) allies, the Radicals of the UCR. Tomorrow, Córdoba Governor Juan Schiaretti is expected to handily take the election for a fifth consecutive Peronist victory in the second most populous and richest Province of the country. Vying for second place are two Radicals, after the Cambiemos coalition effectively suffered a schism. In 2015, Córdoba gave Macri the presidency. Furthermore, toward the end of May the Radicals will hold their national convention, where an important portion of them will be asking for an expanded coalition that includes nonKirchnerite Peronists. Even bolder, some are putting as a condition to their continued allegiance to Cambiemos that Macri steps aside, letting a national primary select a unity candidate who would beat Cristina in a first-round vote; Buenos Aires Province Governor María Eugenia Vidal and City Mayor Horacio Rodríguez Larreta would guarantee victory in their districts, meaning the presidential candidate wouldn’t come from the president’s party.

Macri, of course, despises this idea. And knows he has Vidal and Larreta in his corner. Cristina, his main antagonist, did take the stage this week presenting her blockbuster book titled Sinceramente at the Buenos Aires Book Fair. Incredibly, CFK’s book has become a boon for printers and book stores, selling out in just hours and forcing multiple print runs. They are expected to sell some half a million copies. Her Thursday presentation was a de facto ‘cadena nacional,’ meaning every TV channel and news outlet was focused on covering it. Weirdly, love or hate the Kirchners, it seems like everyone tuned in to hear what she had to say. While Cristina did call for a “national pact,” it seemed like she was playing a role in order to seduce more moderate voters. Yet, a host of hardcore Cristinistas sitting in the audience gives clues as to what such a presidency would look like.

If Macri and Cristina need each other in electoral terms, Argentina needs them and the political leadership as a whole to take advantage of this crisis. Both of them have held onto their strategies, but the clicking of the clock will set them into action. Córdoba and the Radical convention are events neither of them control which will undoubtedly have an impact. Things are beginning to pick up pace.

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Agustino Fontevecchia

Agustino Fontevecchia


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